Fiscal policy in the philippines pdf

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Fiscal policy refers to the “measures employed by governments to stabilize the economy, specifically by manipulating the levels and allocations of taxes and government expenditures. Fiscal measures are frequently used in tandem with monetary policy to achieve certain goals. In the Philippines, this is characterized by continuous and increasing levels of debt and budget deficits, though there have been improvements in the last few years. The Philippine government’s main source of revenue are taxes, fiscal policy in the philippines pdf some non-tax revenue also being collected.


To finance fiscal deficit and debt, the Philippines relies on both domestic and external sources. Fiscal policy during the Marcos administration was primarily focused on indirect tax collection and on government spending on economic services and infrastructure development. The first Aquino administration inherited a large fiscal deficit from the previous administration, but managed to reduce fiscal imbalance and improve tax collection through the introduction of the 1986 Tax Reform Program and the value added tax.

The Ramos administration experienced budget surpluses due to substantial gains from the massive sale of government assets and strong foreign investment iyears and administrations. The Estrada administration faced a large fiscal deficit due to the decrease in tax effort and the repayment of the Ramos administration’s debt to contractors and suppliers. During the Arroyo administration, the Expanded Value Added Tax Law was enacted, national debt-to-GDP ratio peaked, and underspending on public infrastructure and other capital expenditures was observed.

The Philippine government generates revenues mainly through personal and income tax collection, but a small portion of non-tax revenue is also collected through fees and licenses, privatization proceeds and income from other government operations and state-owned enterprises. Tax collections comprise the biggest percentage of revenue collected.

Income tax in the Philippines is a progressive tax, as people with higher incomes pay more than people with lower incomes. In 2008, Republic Act No. Some items which are subject to E-VAT include petroleum, natural gases, indigenous fuels, coals, medical services, legal services, electricity, non-basic commodities, clothing, non-food agricultural products, domestic travel by air and sea. The E-VAT has exemptions which include basic commodities and socially sensitive products.